Select Committee on Environmental Audit Minutes of Evidence

Examination of Witnesses (Questions 464 - 479)



  Q464  Chairman: Good afternoon and welcome. I am sorry that we are running slightly late. We had two divisions in the House a while ago but should now have an uninterrupted session. I must apologise in advance that I have to go to the dentist at about four o'clock for an emergency filling, so my colleague Joan Walley will take over the chair at that point. There are lots of things that we would like to talk to you about and we will deal with them as best we can. First, your industry has published a sustainable aviation strategy. Between 1990 and 2004 emissions from UK domestic and international aviation have more than doubled. Last year they were up by 14%. Is that a sustainable process?

  Dr Sentance: I do not want to get into a debate about the figures. I had not appreciated that the increase was quite that significant. I think that the view put across in the sustainable aviation policy deals with a number of environmental, economic and social issues. Aviation generates a lot of economic and social benefit and as an industry we recognise that we have to deal with the environmental impacts we generate. In the past we have had a record of dealing with noise. The noise impact at Heathrow Airport, for example, has reduced very significantly. What has been going up the agenda in recent years is the issue of emissions, particularly local air quality round airports and climate change. The view that is put across in this document is that the UK aviation industry supports the incorporation of aviation emissions trading as a way to limit the impacts. We support that because that has been demonstrated by a number of studies to be the most economically efficient and environmentally effective way forward. The benefit of it is that if aviation emissions continue to increase in the way they have in the past the industry will have to purchase emissions reductions from other sectors and it will also have an incentive to reduce its emissions through operating emissions trading. We recognise the issue. The view we put forward is that emissions trading is the way to address this issue in aviation.

  Q465  Chairman: The difficulty about that is that at best it will be several years before agreement is reached on the basis on which aviation goes into emissions trading. If that is the only suggestion from the industry about adjusting this growing and perhaps quite urgent problem of increasing emissions probably we will not see any impact from it for seven, eight or nine years. If emissions go on increasing at the present rate the problem will have become quite substantial.

  Dr Sentance: I have come before the Committee before on various inquiries and talked about this issue. Since those hearings in about 2003-04 we have made a lot of progress in getting emissions trading on the agenda for aviation. It is now being actively supported by the European Commission which is developing a proposal which will be put forward later this year. While it may not be possible to hit the deadline of 2008 for the second phase of emissions trading in Europe, hopefully something will be in place in Europe not long after that. If one looks at where we were two or three years ago when people said similar types of things—then a lot of progress had been made. There is now also within ICAO, the United Nations body that looks at environmental issues in relation to aviation internationally, an emissions trading task force on which I represent the aviation industry. That sets out guidelines for the application of emissions trading within aviation more generally in the international arena. I think that both internationally and in Europe we have made a lot of progress in recent years.

  Mr Essex: In support of that, certainly the industry is not standing still. There are opportunities to abate the amount of emissions created by aviation. A good example would be the efforts to focus on the reform and improved efficiency of the air traffic control system, namely the European SESAR project. By our estimates, there would for example be an opportunity to save about 8 or 9% of aviation emissions through an efficient ATC system.

  Q466  Chairman: If we look at it another way, the IPCC estimated that in 1992 aviation accounted for 2% of global carbon emissions. That is the equivalent, roughly speaking, of the UK. One could say, therefore, that the industry could be treated like a G8 country. Kyoto has set a framework for countries to have targets to cut emissions. Do you accept that for your industry? Is that an approach with which you would be happy?

  Dr Sentance: If we operate within the emissions trading scheme effectively that is what will need to happen. There needs to be a cap and part of what has to be agreed in Europe is what that cap is to be. We are assuming that that will be a declining limit over time reflecting the requirements of the general community that CO2 emissions need to come down. When we look beyond 2012 and the next Kyoto agreement, if we have a future agreement for climate change—I hope that one will be agreed internationally—it may well make sense to have something a bit more explicit for aviation than exists in the current Kyoto treaty, which effectively leaves it open to ICAO. I believe that as an industry we would want to be fully engaged in the discussion on Kyoto II to get something that was sensible for the industry as a whole.

  Q467  Chairman: Despite your comment about the progress that has been made in the past three years, I think that underlines the tortuously slow process. I do not in any way underestimate the complexity of trying to get agreement on aviation, particularly if there has to be an allocation for each country. The same IPCC report I mentioned estimated that also taking account of non-CO2 effects in 1992 aviation contributed 3½% of man-made global warming. Do you have an equivalent figure for a more recent date?

  Dr Sentance: I have a study here conducted by scientists in Europe—Robert Sausen, Ivar Isaksen, Volker Grewe, David Lee and various people—which was called the TRADEOFF project. It came up with an estimate that while over time, reflecting some of the trends to which you have referred, CO2 emissions had increased somewhat in their impact on global warming the other effects had come down. For 2000 they came up with an estimate—this was published in 2004, so it is probably the most recent estimate that has been produced—which was roughly the same as the IPCC report in terms of total global warming impact. That suggests that it is still a reasonable benchmark to use. As you are probably aware, once one gets outside the CO2 impacts the scientific understanding of the effects becomes subject to a greater degree of uncertainty and there is greater scope for error, but its central estimate is virtually the same as set out in the IPCC report for 1992.

  Q468  Chairman: The IPCC projected that CO2 emissions from aviation would rise by up to as much 10 times the 1992 level by 2050. Is that a projection with which you would agree?

  Dr Sentance: I do not agree with that as a projection. I do not think that was its central estimate. In percentage terms I believe that its central estimate was an increase from 2 to 5% of total CO2 emissions. Obviously, it predicted some further increase in total CO2 emissions, whereas we know that to stabilise the global atmosphere we probably need to cut the total, but a figure of 10 times sounds to me to be the upper end of the estimate, not the central forecast.

  Q469  Chairman: What is the industry's estimate?

  Dr Sentance: Different players in the industry will predict different growth rates. Perhaps I can give the view of British Airways and Mr Essex will give the view of Easyjet. We believe that a long-term growth rate of air travel of about 3 to 4% is a good benchmark. Historically, one finds high growth rates but, looking forward, many of the markets have generated a lot of that growth, for example the US and possibly Europe in the future- those markets are maturing and growth rates can be expected to be much lower. If one looks at fuel efficiency trends, they are expected to increase by about 1 to 2%, so that leaves one with an emissions growth of about 2%, or possibly in a range of 1 to 3%, depending on whether one has low growth and high fuel efficiency or high growth and low fuel efficiency. The expectation of British Airways is that if we move into a situation where we have emissions trading applied as an economic instrument to deal with carbon emissions aviation will move into a lower growth and higher fuel efficiency world, so it will probably be towards the lower end of that range.

  Mr Essex: I do not disagree with that view. I think it is worth noting that historically the trend has been for growth in aviation to track very closely economic growth. In order also to make a realistic assessment of the future one must also take a view on economic growth and then add in benefits that one would receive from improved fuel efficiency.

  Q470  Chairman: When can we expect a fall in the absolute level of carbon emissions from aviation?

  Dr Sentance: Forecasting the future is a hazardous business. My background is economics where forecasting is probably even more uncertain, but insofar as we can look at the next 10 to 20 years—for example, we see the Government's projections at about the time of the White Paper—we would expect to see continued increases in emissions which reflect the sorts of trends to which I referred. If we look beyond that there is a possibility that the markets will further mature and that new technologies will come along. We certainly encourage discussions between aircraft manufacturers and fuel producers on the possible extension of biofuels. One can envisage some technologies that may come along in a 20 to 30-year timeframe that could begin to reverse that increase. I think that the most likely scenario for the next 10 to 20 years is a continued increase in emissions and the question is: what will be the rate of growth?

  Q471  Colin Challen: The UK industry's sustainable aviation strategy has as its second goal "Aviation incorporated into a global policy framework that achieves stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous man-made interference with the climate system." Can you state the industry's understanding of what that stabilisation level would be in terms of parts per million CO2 in the atmosphere?

  Mr Essex: Given that this is a global issue, I think that it is less the aviation industry's view than the view of the scientists as to what that sustainable level is. The thrust of the sustainable aviation strategy, therefore, is to say that aviation will play its role in stabilising it.

  Q472  Colin Challen: Does that mean you would wait until you had an absolutely firm scientific opinion on the subject?

  Mr Essex: Not at all. I think scientific opinion is clearly driving such outcomes as the ETS which is established on the basis of capping or reducing the overall level.

  Q473  Colin Challen: The strategy document itself or perhaps a Civil Aviation Authority document that I saw last year suggests that the aviation industry is looking at a range of about 350 to 750 parts per million which I think is a little on the excessive side. If one does not settle on a particular level how can one plan to tackle the issue of carbon emissions?

  Dr Sentance: I think that the main thrust from the industry is to accept the scientific evidence. For example, I believe that a figure of 550 parts per million has been quoted and used for UK policy-making. We would not demur from that or seek to impose a different view. Our position is that this is a global issue. If one talks about carbon dioxide, aviation is a small but growing part of that. What we want to do is to get inside a framework which will allow sensible economic and environmental decisions to be made so that we can be playing our part in limiting emissions while respecting the fact that society also sees a lot of economic and social benefit from air travel and we can strike the right balance between the environment and social impacts.

  Q474  Colin Challen: You are right that the fairly standard view at the moment is 550 parts per million, but the Tyndall Centre suggests it should be 450 parts per million. The centre has made some projections to show that the impact of aviation, not even including the radiative forcing factor, can do a great deal to knock out all the gains made elsewhere in the UK domestic economy and all the other things that we are doing in the climate change programme to reduce emissions. What do you say to that argument?

  Dr Sentance: I do not agree with its analysis. We would use the UK's figure of a 60% total reduction that we might look for by 2050 as a good benchmark. I think that that is consistent with 550 parts per million.

  Q475  Colin Challen: Do you agree there is a lot of evidence now emerging to show that 60% is quite an old figure and needs to be increased?

  Dr Sentance: I am not sure that is the case. It is a big challenge for all sectors of the economy; this is not specific to aviation. To make that 60% reduction will be a big challenge and that is a target to which we should work. If I may just comment on the analysis by the Tyndall Centre, together with a colleague in British Airways we have written a short article, which I would be happy to send to the Committee, that looks at the framework of future growth emissions that I have just outlined and how that relates to the figures at which Tyndall arrived. We came up with a rather different conclusion, namely that even in 2050 if there is a 60% cut in emissions aviation will account for possibly 10 to 20% of the total. I am happy to share that with the Committee. But the main point is that there is a lot of uncertainty about growth rates for various different activities as one goes into the future. The key challenge is to get into a framework where we can deal with our emissions in a similar way to other sectors. The framework that we look for in respect of carbon emissions is a trading framework. We hope that in the next few years within Europe we can take the first step in that direction. We believe that that would be a good achievement on behalf of the industry.

  Q476  Mr Hurd: Perhaps we can explore a little the existing incentive to your industry to improve fuel efficiency. Broadly, what proportion of your costs is taken up by fuel?

  Mr Essex: You are probably aware that in the past year the cost of fuel has doubled, so we are trading nearer to 25 to 30% of our cost base.

  Dr Sentance: For British Airways it is getting up towards that; it is probably 20 to 25%. The norm is more like 10 to 15%. I am hesitant to say "normal fuel prices"; I am talking about the price of fuel in 1990s. It has gone up to 20 to 30%, depending on what airlines you are looking at and their operations.

  Q477  Mr Hurd: What proportion of your respective fleets would you expect to be replaced on a 10 to 15-year view, and what levels of relative fuel efficiency would you expect from the new fleet in that timeframe?

  Dr Sentance: The figures that I quoted before—the 1 to 2% a year improvement—would give one something like 30 to 35% in a 25-year period as a central estimate of fuel efficiency improvement. That is the sort of period during which we would look at replacing aircraft. We would want to replace them when they get to about 20 years of age.

  Q478  Mr Hurd: But from where we are today over the next 10 to 15 years what proportion of the fleet of British Airways would be replaced?

  Dr Sentance: I am not at liberty to give you any figures. As you may be aware, we are thinking about fleet issues at the moment, so it is a rather sensitive matter. I do not want to give you figures and create any hostages to fortune. I think you can get a flavour of it from the fact that aircraft are kept for about 20 years. In 10 to 15 years one might turn over half one's fleet, perhaps a bit more.

  Mr Essex: The low fare industry is in a slightly different position, it being a younger industry. Many of the low-fare airlines have acquired new aircraft from day one, so in that respect they are already operating the most environmentally efficient and cleanest aircraft. We are really looking to manufacturers to introduce new models. Our understanding—nothing is firm yet—is that Airbus is already contemplating new models in the 2012 to 2016 timeframe. Certainly, given the advent of an ETS our evaluation of those products, therefore, will include the monetised effects of emissions. Quite simply, we shall not be taking out our chequebooks to acquire those aircraft unless they show a step change performance in fuel efficiency.

  Q479  Mr Hurd: There is an argument that governments should not give as big a green light as has been given in this country to the expansion of your industry until there is more material evidence of technology progression. What is your view on that?

  Mr Essex: I just go back to a point made earlier. The growth in the industry is not out of control; it is not some spurious thing that just occurs because we decide to put on extra capacity. The industry is quite well disciplined. The shareholders put in capital and expect a return, so there is a very strong correlation with economic growth. I suppose our view would be that if, for example, airport capacity is not provided in this country it will be provided in other countries. One is then in a situation where because there is a natural demand people will fly to that second country to get to their destinations. If you like, you are creating more emissions because you are not servicing the natural demand in the most efficient way.

  Dr Sentance: I believe that as a policy it would be the wrong to say that there should be no expansion on environmental grounds. That seems to me to be going back to a strand of thinking in the 1970s that somehow we cannot have economic growth—which is the thing that drives the expansion of aviation—because of environmental issues. The stance we take in relation to Heathrow, where expansion is most important, is that as part of the process by which the Government gives approval to expansion we expect to have to demonstrate as an industry that we can deal with the environmental issues that arise. At Heathrow that involves making sure that we do not add to the noise issues and create a worse air quality situation—hopefully, the noise and air quality will continue to improve in terms of the social impacts—and that we have a proper mechanism in place to deal with the climate change impacts. The conclusion which government came to in the White Paper, which we support, is that the right mechanism should be based on emissions trading and the first step should be through incorporating it into a European emissions trading scheme. I think that if those three conditions are in place and there is a process to deal with the noise, air quality and the climate change impact it is quite legitimate to say that on that basis the industry should be allowed to expand and deliver the economic benefits that that produces.

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